Southampton: Hotel sector bucks trends with cricket boost

While UK hotel trading has been disappointing for the first half of the year, according to PwC’s UK Hotels Forecast 2019-20, Southampton’s hotel industry has been bucking the trend.

PwC’s UK Hotels Forecast 2019-2020 reviews hotel performance over the past year and makes predictions for the next 12 months.

During June 2019 Southampton’s occupancy levels were up 4.3% from June 2018, with the Average Daily Rate (ADR) also up 11%, from £77.18 in June 2018 to £85.75 in June 2019.

The success in June 2019 directly coincides with the ICC Cricket World Cup’s five fixtures held at Southampton’s Hampshire Bowl. With greater numbers of tourists coming into the area, the local hotel industry received a strong run rate.

But Southampton’s hotel industry has also been scoring runs over the past year, with room revenue up 9.8% from 2018, far exceeding the UK regional average of 2.6%, and the first half of 2019 has already seen a performance of +6.2%.

With regional hotel market conditions predicted to get tougher into 2020, Southampton’s growth to date in 2019 places it in a stronger position than many UK cities to rise to the challenge ahead, and avoid being caught out. PwC’s forecast for the regions for 2020 is a -0.6% decline in occupancy growth, a slight gain in rate, but a drop in RevPAR of -0.3%.

Julian Gray, PwC Southampton office senior partner, said: “It’s fantastic that Southampton’s hotel industry has had such a successful year so far. This is a dynamic region and it’s exciting it has benefited from hosting global sporting events such as the Cricket World Cup.

“At PwC we are working alongside the Solent Local Enterprise Partnership to develop the Solent’s Local Industrial Strategy. It’s important that in these challenging times we recognise the role the tourism industry has in unlocking the region’s potential, and shaping it’s long-term future.”

Sam Ward, UK hotels leader at PwC, said: "The UK hotel sector is at a pivotal point. Looking ahead to 2020, while hotel performance will vary widely by geography, segment and business model, we remain overall more cautious in our outlook. This latest UK Hotels Forecast reflects political and economic uncertainty, weaker business and leisure confidence, and the especially high number of new hotel supply additions in some markets around the UK, which have all created challenging conditions for hoteliers.

“Sporting events have had a positive effect for hotels this summer. The ICC Cricket World Cup in particular helped boost the fortunes and particularly the ADR of hotels in hosting cities London, Manchester, Birmingham, Nottingham, Leeds and Southampton. And UEFA Euro 2020 should equally boost London and Glasgow in 2020.

“However the pressure of rising costs for operating hotels, which continues to increase above UK inflation, puts any modest revenue growth under strain. The devaluation of the pound has also pushed up the cost of importing food and drinks for hotels. Additionally, low UK unemployment rates, a reduction in EU nationals for recruitment due to Brexit concerns, and above-inflation increases in the minimum wage have all contributed to increased costs associated with acquiring, training and retaining staff.”